At 1 October 20X7, Mcllroy Co had an 80% holding in Spieth Co and a 65% holding in Clarke Co. On 30 September 20X8, Mcllroy sold all of its 65,000 $1 shares in Clarke Co for $582,000. No accounting entries have been made to record the disposal, other than to record the disposal proceeds in a suspense account. The disposal is the final part of a plan by Mcllroy Co to dispose of Clarke Co’s operations because it operates in separate business sector to the other companies in the group. Clarke Co’s retained earnings at 1 October 20X7 were $286,000. Mcllroy Co measures all non-controlling interests using the proportionate method.
The draft individual statements of profit or loss of the three companies are shown below:
Draft statements of profit or loss for the year ended 30 September 20X8
The draft individual statements of financial position at 30 September 20X8 for Mcllroy Co and Spieth Co show:
Additional information
(1) Mcilroy Co acquired its holding in Spieth Co on 1 October 20X4 when Spieth Co’s retained earnings were $180,600. The fair values of Spieth Co’s net assets at the date of acquisition were the same as their carrying amounts, with the exception of equipment which was èstimated to have a fair value of $80,000 in excess of its carrying amount. The equipment had a remaining useful life of eight years at the date of acquisition. Depreciation is presented within administrative expenses. Mcllroy Co had determined that the goodwill recognised on the acquisition of Spieth Co has been impaired by $30,000 in the current year.
(2) Mcllroy Co acquired its holding in Clarke Co several years ago for $268,000 when Clarke Co’s retained earnings were $174,200. The fair values of Clarke Co’s net assets at the date of acquisition were the same as their carrying amounts. The goodwill in Clarke Co was impaired by $25,000 in the year ended 30 September 20X7. No further impairment of the goodwill in Clarke Co is required in the current year.
(3) During the year Spieth Co sold goods to Mcllroy Co for $54,000 earning a gross margin of 20%. At the year-end Mcllroy Co had half of these goods in inventory.
(4) Mcllroy paid a dividend of $2.10 per share in the current year. Spieth Co paid a dividend of $1.50 per share during the current year. Clarke Co did not pay a dividend.
(5) Clarke Co is considered a discontinued operation of Mcllroy Co in accordance with IFRS 5 Non current Assets Held for Sale and Discontinued Operations.
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